Having entered uncharted waters in the fight against Covid-19, the government announced sweeping fiscal measures aimed to safeguard the economy last week. Our Jaffar Shah, Partner at Shaar Bridge Solicitors discusses in particular the Coronavirus Job Retention Scheme and the grants available to businesses.
The coronavirus pandemic has indeed brought businesses to its knees. With spending decreasing and lack of instructions within the service industries, businesses have had to make the difficult decision of laying people off as a result of the catastrophic effect of this silent killer. I believe initially the following two schemes will be of immediate interest to businesses.
Coronavirus Job Retention Scheme
This scheme will allow businesses to recover 80% of the salaries that are paid to employees that will be on “furlough leave” up to a maximum of £2,500.00 per month. These unprecedented measures will allow employers to retain their employees rather than make redundancies as they will be able to be reimbursed by the government for salary costs.
All UK businesses are eligible under the scheme which it seems only covers employees as opposed to anyone that is self-employed.
In order for businesses to avail themselves under this scheme we would advise writing to all affected employees to agree “furloughed leave”. Once this is agreed, the employer will be required to notify the HMRC which we understand will be through an online system which is urgently being set up.
In terms of the salary payment, it will be up to the employer to decide whether to pay any shortfall in the salary once the 80% payment is made. It is recommended to have a consistent approach on this issue with all employees to avoid resentment.
Finally, the government has announced that they will backdate this scheme to the 1st of March 2020 so employers should act quickly in the decisions they take to ensure they can claim for March. It is also envisaged that this subsidy will cover NI contributions in addition to the fact that the scheme is intended to be operational in early April.
Small businesses who are in receipt of small business rate relief or rural relief will automatically receive a grant of £10,000.00. The government has announced that local councils will be responsible in contacting eligible businesses in making the relevant payments however, it is not at all clear how the councils will cope and how long this will take to roll out.
A further funding of up to £25,000.00 is available for retail, hospitality and leisure businesses with property where the rateable value is between £15,000.00 – £51,000.00. Again, this is something the local councils have been tasked with to make payments to eligible businesses. How this pans out in the coming weeks is something that will be eagerly followed.
It is advised that the government announcements on this are followed and if a business does not receive these grants by late April then contact is made with the councils. Again, this is subject to the government advice.